Bright future for London's serviced flats
London serviced apartment properties offer attractive investment yields as well as income and capital growth potential, British property consultants said.
'Savills forecasts capital growth for serviced apartments of 6.3 per cent per annum over the next four years, against 5.6 per cent for residential,' said Britain-based property consultant Guy Nixon, founder of Go Native, which manages serviced apartments in London.
Nixon said serviced apartments fell into the same category as residential as far as financing was concerned. 'We are seeing lending coming through at 70-30 loan-to-deposit ratio,' he added.
A number of serviced apartment blocks being offered in Canary Wharf, the City of London and at Nottingham Place were attractive, said Nixon. Total all-in costs of these investments, including site purchase, stamp duty, agency fees and legal fees, ranged from GBP4.6 million (HK$59.4 million) to GBP14.6 million, he said.
Gerald Allison, a director at property consultancy DTZ who advises clients from the mainland and Hong Kong on investments in London, agreed that the serviced-flat market was a growing sector in London.
'The supply of serviced apartments is growing significantly to fill the gap between owning an apartment for occasional use and relatively expensive, conventional hotel rooms.
'The increase in demand comes mainly from business [people] seeking to accommodate visiting colleagues, from executives who look for a 'crash pad' and for high-value owners who need secure accommodation with the convenience of housekeeping services,' he said.
'This is an emerging market when compared to buy-to-let residential units. Capital growth for prime units is likely to be good and in locations that outperform ordinary residential in the short term.'
Allison said the market was concentrated in Central London and location was very important - especially the proximity to the business districts.
He also highlighted the importance of good management.
'Buyers need to be sure that the service providers are competent and cost-efficient. Rental incomes are likely to be good. This is a smaller market than prime residential. Look for the best stock to offer better returns,' he said.
Nixon said his company was expanding to property sales, targeting affluent Hong Kong and mainland Chinese buyers seeking investment opportunities in the serviced apartment market in Britain.
He said Go Native could help clients buy service flats en bloc.